Minister: Direct investment by State in banking sector 'last resort'

The Minister for Finance Brian Lenihan has said that direct investment by the State in the banking sector is “a last resort.”

The Minister for Finance Brian Lenihan has said that direct investment by the State in the banking sector is “a last resort.”

Speaking on RTE radio the Minister for Finance Brian Lenihan said that while the Government had not ruled out public investments in the banks, the Government has told the banks they must seek private investment.

“That is what they have always done and it is entirely legitimate that the taxpayer should not put all of the funds required to capitalise the banks,” he said.

If the taxpayer was asked to re-capitalise the six Irish banks and financial institutions the Minster said that “you would then in effect be nationalising the banks and it would be hard to justify having six separate institutions ”

He added that the central core concern of the government that banks are in a position to lend money into the economy “so that businesses and consumers can access the funds by way of credit to keep the economy going.”

The Minister said that he wanted to make it clear that the government putting money into the banks was a last resort. He said that it is very important that “we have investment in Ireland.”

“If private investors are prepared to put money into the banks on appropriate terms and that serve the public interest then the government would welcome that.”

The banks do need some funding to ensure that economy is stimulated and can more forward. He said that there was “an onus on the banks to demonstrate a capacity to convince the markets that they are worth investing in.”

He added that he was disappointed with FG leader Enda Kenny’s description of those who invest in Ireland as “vultures.”

While he had concerned that ‘assets strippers’ could come in the Minister said that under the terms of the Government’s guarantee dividend policy and business plans and of the banks have to be supervised by the State over the next two years.

He said that the government would insist on further safeguards in any large scale private investment in the banks.

On September 30 Minister Lenihan said that the government’s guarantee of bank deposits, liabilities, and the lending obtained with other banks was an important move, and is “the first step in the reform of the banks.”

Last week the Minster said that he spoke to the heads of Ireland’s banks and financial institutions about a government commissioned report analysing the loan quality of the banks.

That looks into the loans that banks have made over the years and seeing how reliable the banks estimates are of what they are going to recover.

The Minister said that while it showed that there is no threat to the solvency to the banks, he would not disclose the contents of the report for commercial reasons.

He added that there is a world of difference between a solvent bank and one that is thriving and putting credit into the economy.

“The Governments core concern is that the banks don’t just survive as institutions but that they as exist as a motor in the economy,” he said.

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